Personal Finance - Chapter 3

Day-to-day financial activities necessary to manage current personal economic resources while working toward long-term financial security

Money Management

The difference between total assets and total liabilities

Net Worth

An example of a liquid asset would be

A checking account

Cash and other property with a monetary value

Assets

A financial statement that reports what an individual or a family owns and owes; also called a net worth statement

Balance sheet

A (n) ______________________ is a specific plan for spending

Budget

A specific plan for spending income

Budget

The difference between the amount budgeted and the actual amount received or spent

Budget variance

The actual inflow and outflow of cash during a given time period

Cash flow

A financial statement that summarizes cash receipts and payments for a given period

Cash flow statement

Debts that must be paid within a short time, usually less than a year

Current liabilities

The amount by which actual spending exceeds planned spending

Deficit

Money left over after paying for housing, food, and other necessities

Discretionary income

Assets represent amounts owed to others that must be paid within the next year

False

Most financial records should be kept in a safe-deposit box

False

Definite financial obligations are referred to as

Fixed expenses

Inflows of cash to an individual or a household

Income

A personal cash flow statement presents

Income and payments

The inability to pay debts when they are due because liabilities far exceed the value of assets

Insolvency

Amounts owed to others

Liabilities

________________________ represents amounts owed to others

Liabilities

Cash and items of value that can easily be converted to cash

Liquid assets

Debts that are not required to be paid in full until more than a year from now

Long-term liabilities

A private storage area at a financial institution with maxim security for valuables

Safe deposit box

The amount by which actual spending is less than planned spending

Surplus

Earnings after deductions for taxes and other items; also called disposable income

Take-home pay

A budget deficit exists when actual spending exceeds projected spending

True

A personal balance sheet reports the financial position of a person or family on a given date

True

Spending less than your income will increase net worth

True